Involved In Real Estate · Las Vegas, NV · Member since 2010 · 341 posts · 86 votes
There's been a huge push to slow down foreclosures to prevent robo-signing. In Las Vegas, they have completely stopped Notice of Defaults from filing, which means that owners can live in their houses for free.
Here is a little twist, some jurisdications like Nevada have HOAs (Home Owners Associations) be super priority liens, in which they can take the deed, if they foreclose, subject to any liens, 1st DOT/2nd DOT/ HELOC/ ETC.
Now since lenders cannot foreclose and HOAs still can foreclose, doesn't this make the HOA trustee sale a lot more valuable? You can virtually buy an HOA deed for $1500-3,000 and rent it out until the lenders decide to foreclose which wont happen for almost a year.
I think the only thing is ethics. You rent a house to a family knowing they might be forced out in a few months to a year. Also you have to deal with the fact they will receive letter from the bank on their door and will ask you whats up. you will have to either tell them the truth or lie about it. Some might not pay the rent to you because they know its going to foreclosure. Too many headaches for me I rather do things above the table and have a clean conscience. Besides you can put all the money you would invest in these deeds together for a down payment on a property you would be able to keep forever and actually build some equity in. I would not invest and do business like this but thats just me. If you do decide to persure this let us know how it goes.
I've never seen an HOA foreclose in my area, but if you buy the lien you could. But you would have to make sure that the there is equity in the property because you wouldn't want to buy a house that's upside down. I'm assuming there won't be many of those deals out there. In my market maybe 1 in 100 people who are behind have equity. And the ones that do have equity are usually smart and won't let their house get to that point.
It does not matter if the house is upside down. You are betting that the bank wont foreclose and you will be able to recoup your inital investment plus some before the foreclose. You would be lucky if you bought the deed and had equity then you could resell.
This is nothing new and has been happening in florida. Props inc being the company that had been getting the most publicity. You also must pay the hoa fee while you own the property or some hoas might try to collect there fees from the renter.
That's exactly what I'm thinking Michael. For beginners, they have a small investment for a limited amount of time. If you get sick of it, the cost is fairly minimal. Did I miss anything?
I think the only thing is ethics. You rent a house to a family knowing they might be forced out in a few months to a year. Also you have to deal with the fact they will receive letter from the bank on their door and will ask you whats up. you will have to either tell them the truth or lie about it. Some might not pay the rent to you because they know its going to foreclosure. Too many headaches for me I rather do things above the table and have a clean conscience. Besides you can put all the money you would invest in these deeds together for a down payment on a property you would be able to keep forever and actually build some equity in. I would not invest and do business like this but thats just me. If you do decide to persure this let us know how it goes.
Unforetunately or should I say foretunately, I'm in the business of flipping and not property management. In reference to this thread, it allows the ability for brand new investors to try their luck out on these types of liens/deeds.
The ethical concern needs to be addressed up front. If one discloses to the tenant that the property is currently owned by the owner but subject to foreclosure and the tenant is okay with it, then that meets that aspect of it.
Legality: The deed is in the owners name and they have every right to do what they want to the property (unless it is illegal to rent per city ordinance or HOA) .
It just makes for an interesting debate becuase this robo-signing fiasco has caused many off-shoot business models that actually work in the interim.
In Vegas this might work out well for many renters. As you know there are plenty of people looking for shorter term leases, so this could be the solution. I may be mistaken, but I believe a foreclosing party has to abide by the terms of the lease in place so long as the lease is a bone fide lease and is at market rent. If anyone knows more about this, please chime in.
..... some jurisdications like Nevada have HOAs (Home Owners Associations) be super priority liens, in which they can take the deed,.....
Andy, what is "be super priority liens" mean?
I'm wondering what tenancy rights or equity interest is foreclosed upon by the HOA, that while you may be catching up on back HOA fees and receiving that interest it may not provide ownership but rather a security interest....and what the deed is actually granting?
I'm not sure if having an HOA Deed is something you can claim tenancy rights to and if not you certainly can not lease or assign a right you do not have which would make the scheme fraud.
The ethical issue is not just with a leasee. If your deed is subject to the rights of the (or other) lien holders then they have priority. Putting a lease on the property clouds title as a leasehold interest and any bonafide leasehold interest must be upheld after foreclosure for up to 6 months under recent federal law.
So, with your subordinate interest you may have placed a tenant in a property keeping another lien holder from securing their collateral, doing so intentionally, to profit.....it's starting to have an odor about it now, I can see some prosecuter looking up things like lien fraud, bank fraud, establishing false liens and on and on to impeading operations of a federally insured depository....I don't know, just sounds like things they might try to stick you with if for no other reason acting unethically toward other creditors.
I'm not sure why so many people think that all one has to do is give others notices and disclosures about what they are doing an it absolves them of ethical responsibility or shields them from violations of law, just not so.....in many cases.
Interesting thought of taking possession of a property with a very limited interest in it, passing it off allowing others to live in it, blocking other creditors from taking possession for awhile and betting on when the tenant will have to leave.....interesting that someone would think of it....lol...
In Vegas this might work out well for many renters. As you know there are plenty of people looking for shorter term leases, so this could be the solution. I may be mistaken, but I believe a foreclosing party has to abide by the terms of the lease in place so long as the lease is a bone fide lease and is at market rent. If anyone knows more about this, please chime in.
Good catch Phillip...
Yes, with a bone fide lease, a written lease agreement made prior to any notice of foreclosure at arms length at market rates. The creditor must abide by the lease for up to 6 months after foreclosure or to its termination if sooner and the creditor is entitled to rents. Filing a lease after the date of notice or with the intent to defraud is a no no...
A super priority lien is Defined as a lien that moves ahead of other liens regardless of when the lien was placed on a property. Typically these are reserved for back taxes, sewer, trash. In the state of Nevada, HOA liens take priority over 1st deed of trust, 2nd dot, heloc and etc.
Now what I was staying before is that when owning a foreclosed hoa, it is still subject to the dots but has a right to be paid off in its entirety prior to other loans.
By doing so Does Not block a creditor from taking their property back. The question in play is that we have a state law (Assembly Bill 284) that Makes lenders not want to foreclose and as a result the hoa deed a lot more valuable because the longer someone owns the deed prior to foreclosing (trustee sale) , the more months they have to collect rent money to offset whatever they purchased the hoa at.
Okay, a statutory lien, takes priority by statute. Do you know what kind of deed is granted, what rights are conveyed. Usually such are for the indemnifcation of losses or financial amounts due.
Regardless, yes, if you can get such a lien it could be a cheap way to get to a property, I'm still not sold on the leasing arrangements.
Having priority means you get first shot at the dollars from any sale, you would still be placing the junior lien holders at a disadvantage if they had to honor an existing lease agreement.
And you know that in any foreclosure notice is given to all other creditors, so usually a subordinate (junior) lien steps up and pays off such small liens to protect its collateral security.
I'm not familiar with the NV Bill, but are you saying it blocks (or stalls) foreclosures (probably making the process a judicial foreclosure) and it would only apply to mortgage loans and not all foreclosures? Seems what is good for the goose is good for the gander as well....